2018 (2) TMI 990 - HC - VAT and Sales Tax

Reversal of input tax credit - TNVAT Act - Form C - principles of Natural Justice - Held that - there is violation of natural justice and writ Court has not committed any error - Writ Court has set aside the orders impugned therein, on the grounds that there was no proposal for input tax credit. If law permits initiation of fresh action, no liberty need be given - petition dismissed.

Summary

Issues:
1. Assessment made in CST:Nos.1135594/2013-2014 and 1135594/2014-15
2. Applicability of Section 19(5)(c) and Section 19(2)(v) of TNVAT Act
3. Eligibility of ITC under Section 19(2) of TNVAT Act
4. Reversal of ITC under different sections for sales to SEZ
5. Violation of principles of natural justice in assessment orders

Analysis:

1. The judgment by the Madras High Court dealt with writ petitions filed by M/s. Blessed Stars challenging the assessments made in CST:Nos.1135594/2013-2014 and 1135594/2014-15. The Court considered the contentions regarding the reversal of Input Tax Credit (ITC) under various sections of the TNVAT Act.

2. The main argument presented was that the reversal of ITC under Section 19(5)(c) should only apply when C Forms are not filed, which was not the case here as the turnover was covered by C Forms. Additionally, it was contended that Section 19(2)(v) should not lead to the reversal of ITC as it pertains to granting ITC, not reversing it. The respondents argued that both traders and manufacturers are eligible for ITC under Section 19(2) of the TNVAT Act.

3. The Court noted that the petitioner was engaged in selling goods purchased against C forms and I forms, making them eligible for ITC under Section 19(2). The issue of reversal of ITC under different sections for sales made to SEZ arose, emphasizing the need for a clear finding to invoke the relevant sections for reversing ITC.

4. It was contended that the impugned assessment orders were illegal and violated the provisions of the Act, including principles of natural justice. The Court acknowledged the violation of natural justice and held that the writ petitions could be entertained as the appeal remedy was deemed ineffective in this case.

5. Ultimately, the Court quashed the impugned orders directing the reversal of ITC under Section 19(2)(v) and 19(5)(a) on technical grounds. The orders of assessment were confirmed in favor of the petitioner, and the writ petitions were partly allowed. The Court dismissed the appeals and held that the common order did not warrant interference, closing the connected Civil Miscellaneous Petitions without costs.